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Amazon, Facebook trying to disarm the FTC by going after its biggest weapon: Lina Khan

Lina Khan, nominee for Commissioner of the Federal Trade Commission (FTC), testifies during a Senate Committee on Commerce, Science, and Transportation confirmation hearing on Capitol Hill in Washington, DC, April 21, 2021.

Saul Loeb | AFP | Getty Images

Amazon and Facebook have filed petitions seeking Federal Trade Commission Chair Lina Khan’s recusal in antitrust cases involving their companies.

Khan’s confirmation to the FTC and appointment to lead the agency presents one of the clearest threats of major regulatory action in the tech sector in years. By seeking to recuse Khan, the companies are going after one of the biggest antitrust weapons the FTC has and, whether Khan is recused or not, the decision could muck up the antitrust charges against either company.

Experts told CNBC that it makes sense for Facebook and Amazon to try to get Khan removed from the suits. And by doing so, the companies may be able to cast doubt on Khan, even if she doesn’t recuse.

There’s a bit of a Catch-22: Khan could recuse herself and leave the votes on future antitrust cases against the two companies to a group of commissioners who were evenly split on whether to file the initial charges against Facebook. Or, Khan may not be recused and either company could argue the whole case was tainted from her involvement.

Here’s what’s going on.

Facebook and Amazon think Khan already made up her mind

Both companies argue Khan’s past writing show she’s already made up her mind on the tech firms’ liability, which the companies say should disqualify her from their cases.

It’s not yet clear how Khan will handle the requests or how a federal court would deal with the challenges if it came to that point. The FTC previously declined to comment on the petitions.

Khan said at her Senate confirmation hearing that she has no financial conflicts that would be grounds for recusal under ethics law and that she would follow the facts of a case where they lead.

Her participation in antitrust matters about the two companies appears vital to their advancement. Both sitting Republican commissioners voted against bringing the Facebook lawsuit, which was recently dismissed by a federal judge. The FTC has an opportunity to file an amended complaint this month, but would need to vote to do so. Assuming both Republicans vote against a new complaint and the other two Democratic commissioners were to vote for one, there would likely be a stalemate without Khan as a tiebreaker.

Even if the companies are unsuccessful in getting Khan recused, they could cast a shadow over future FTC proceedings involving their businesses.

Facebook and Amazon have a right to seek recusal

Khan has been heralded as one of the leading progressive thinkers in antitrust since publishing “Amazon’s Antitrust Paradox” in the Yale Law Journal while a law student in 2017.

The article argued that enforcers should apply a more expansive view of antitrust laws to digital companies like Amazon. Khan argued that traditional frameworks that largely assess whether prices go up or down for consumers could miss incentives for high-growth firms to engage in predatory pricing, among other aspects unique to their business models.

Khan also worked for the Open Markets Institute, a political advocacy group that has been critical of several of the major tech firms’ power. More recently, she worked for Democrats on the House Judiciary subcommittee on antitrust, where she helped compile findings from the panels’ investigation into Amazon, Apple, Facebook and Google into a report that made several recommendations for reforms. Khan worked on the Google section of that report.

Amazon and Facebook argue in their petitions that Khan’s past statements and work show she’s already judged their cases, which should disqualify her participation.

Experts interviewed by CNBC said petitions for recusal of FTC commissioners happen but aren’t common. That makes the two petitions in a matter of weeks seem like an outlier.

But, the experts said, it makes sense the companies would pull out all the stops given their opportunity to do so.

“The last thing a party would want to do would be to sleep on its rights, so it’s not surprising that they would go ahead and raise the issue now,” said Stephen Calkins, a law professor at Wayne State University and a former FTC general counsel. “And raising it could serve a purpose even if all it does is to provide an argument the parties could make if any matter ever goes forward and ends up in a court.”

One difference between Amazon and Facebook’s petitions is that Amazon is seeking to block Khan’s participation in a possible future case, while Facebook is seeking to stop her from being involved in an ongoing one.

Calkins and former FTC Bureau of Competition Director Bruce Hoffman said they were unaware of any time restrictions for considering recusal. But, speaking generally about petitions for recusal and not about the Facebook case in particular, Hoffman said a commissioner would want to seriously consider consequences of participation regardless. That’s because a company could use what it sees as the unfair participation of a commissioner in future arguments to show the case against it was unjust.

“That’s a material, real threat to the viability of any decision the FTC might reach on things where a serious recusal issue comes up,” Hoffman said.

Precedent

The key case both Amazon and Facebook point to as precedent in their petitions is known as Cinderella Career & Finishing School v. FTC.

In that case, the court determined that then-Chair Paul Rand Dixon denied due process by participating in the case after making public statements that appeared to forecast his opinion.

But there’s an important detail in that case that could make it different from current and future cases involving Amazon and Facebook.

In the Cinderella case, Dixon effectively served as a judge during an internal proceeding through the FTC’s administrative law process. Through that process, an administrative law judge will hear a case and make a decision, which either party can appeal up to the full commission. From there, it can be appealed to federal court.

If Khan were to bring a case through the administrative law process, it would more closely resemble the Cinderella case. But if she and other commissioners decide to re-file the Facebook case in federal court, she’d still be handing over the ability to rule on the outcome of the case to a federal judge. Because she wouldn’t be serving as an adjudicator in that scenario, a court might consider a different standard for recusal.

Another case the FTC could point to as precedent is the Association of National Advertisers v. FTC. In that case, then-FTC Chairman Michael Pertschuk was initially ordered by a federal court to recuse himself from a rulemaking inquiry because of past criticism of its subject. But an appeals court later overturned that decision.

Still, Pertschuk ended up withdrawing from the matter because he said it created a distraction.

Lasting impact

Even if Amazon and Facebook are unsuccessful in securing Khan’s recusal from their cases, it could continue to cast doubt on litigation against them. The public could be convinced that the lawsuits are politically motivated, for example.

More importantly, a court could decide Khan’s involvement in a case was in fact inappropriate, which could put the lawsuit in jeopardy. So even if Khan’s participation doesn’t trigger the FTC’s rules about recusal and Khan herself does not choose to step away, the decision will hang over the case.

For that reason, any commissioner facing significant recusal requests must consider them carefully, Hoffman said. Still, he added, commissioners can take steps to ensure that their proceedings are “beyond reproach,” such as by having another commissioner preside over an internal case and being especially meticulous with the facts.

“It’s the sort of thing where the FTC might want to look very seriously and carefully and the commissioner at issue might want to look very seriously and carefully at the grounds for the recusal request and determine if they should be recused,” Hoffman said. “Because you don’t want to go through all the work to do a proceeding, get an outcome and then have the whole thing be set aside because of a recusal problem.”

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Facebook Seeks Recusal of FTC Chair Lina Khan in Antitrust Case

WASHINGTON—

Facebook Inc.

sought the recusal of Federal Trade Commission Chairwoman Lina Khan from the agency’s deliberations on whether to file a new antitrust case against the company, arguing she couldn’t be impartial because of her long history of criticizing it and other big-tech firms.

“Chair Khan has consistently made public statements not only accusing Facebook of conduct that merits disapproval but specifically expressing her belief that the conduct meets the elements of an antitrust offense,” the company said Wednesday in a formal recusal petition filed with the FTC.

“When a new commissioner has already drawn factual and legal conclusions and deemed the target a lawbreaker, due process requires that individual to recuse herself,” Facebook said in the petition.

An FTC spokeswoman didn’t immediately respond to a request for comment. Ms. Khan has said previously that she would consult with FTC ethics officials if recusal questions arose.

Facebook’s request comes two weeks after a similar recusal petition was filed by

Amazon.com Inc.,

which is facing multiple investigations at the FTC, and is the latest sign that giant technology companies are favoring aggression over a conciliatory approach with Ms. Khan, who built her career advocating for bold antitrust action to rein in the dominant players in Silicon Valley.

President Biden installed Ms. Khan as the head of the FTC last month, part of a growing administration effort to restrain corporate power.

Twitter CEO Jack Dorsey and Google CEO Sundar Pichai stopped short of endorsing changes proposed by Facebook CEO Mark Zuckerberg to Section 230, a law that spells out who is legally responsible for content on the internet. Photo: C-SPAN

The FTC soon must decide whether to file a new antitrust lawsuit against Facebook after a judge threw out the FTC’s previous complaint as legally insufficient. Because of the approaching deadlines in the case—the judge’s June 28 ruling gave the FTC 30 days to file an amended lawsuit—it could force Ms. Khan to confront the recusal issue on an accelerated timeline.

Ms. Khan has been a prolific writer about antitrust issues, especially as they related to big tech companies. She previously worked for a progressive antitrust advocacy group and was a key staffer on a congressional antitrust panel that conducted a 16-month investigation of large online platforms and last year recommended that lawmakers take steps to rein them in.

The FTC’s vote on a new Facebook lawsuit is likely to be a divided one. Democrats hold a 3-2 commission majority; if Ms. Khan sat out, there likely wouldn’t be a majority to sue Facebook again. The commission’s two Republican commissioners voted against the first lawsuit the FTC filed against Facebook in December.

The FTC, along with 46 states, had alleged Facebook was engaged in illegal monopolization, including by buying up other companies such as WhatsApp and Instagram to prevent them from challenging Facebook’s market position. The company denied the allegations, saying it competed fairly and achieved success because its services are popular with consumers.

In last month’s ruling, U.S. District Judge

James Boasberg

in Washington dismissed the FTC’s case at the outset of pretrial proceedings, saying the FTC didn’t plead enough allegations to support monopolization claims against Facebook. He also said the FTC didn’t have a valid challenge to Facebook’s policy of refusing to grant interoperability permissions to competing apps. The judge gave the commission 30 days to file a new lawsuit that attempts to make more detailed allegations.

Under the governing legal standards for recusal, a company seeking a commissioner’s disqualification on the grounds of prejudgment must show that a disinterested observer could conclude that the commissioner had already judged both the facts and the law in advance of a proceeding.

Ms. Khan gets to decide in the first instance how to address Facebook’s request for her disqualification. Past FTC practices show that, at least in some circumstances, the whole commission can weigh in.

Disqualification requests haven’t seen much success in modern times, but there are older court rulings that vacated FTC enforcement actions on the grounds that a commissioner should have been disqualified.

Write to Brent Kendall at brent.kendall@wsj.com

Copyright ©2021 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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White House reportedly plans to name Amazon foe Lina Khan to FTC

Enlarge / Lina Khan, as photographed for a 2017 profile in The Washington Post.

US President Joe Biden is reportedly planning to nominate antitrust scholar Lina Khan to the Federal Trade Commission, a move that would indicate his administration is open to aggressive antitrust regulation not only generally but specifically against Amazon and other Big Tech firms.

The Washington rumor mill has been floating Khan’s name as a possible candidate for the commission ever since Biden won the election, and Politico reported today that the White House is indeed planning to tap her for the role, which requires Senate confirmation. At present, Khan is an associate law professor at Columbia Law School.

Khan vaulted directly to antitrust superstardom in 2017, while she was still a law student, when she published her blockbuster paper, “Amazon’s Antitrust Paradox,” in the Yale Law Journal.

Antitrust law, as we’ve explained, is not just about monopolies but rather about market power. In short: being the largest company in a sector is fine, but harming consumers or competitors to become and stay that way is not.

Since roughly the start of the Reagan administration, federal antitrust regulators have largely adhered to a theory of competition law called the Chicago School that takes a narrower view of antitrust enforcement than previous schools of thought. At a very high level, Chicago School adherents tend to think of competition and mergers in terms of price control. Basically, if you control a market, you can extort buyers; therefore, competition is required to manage prices. By the same token, if consumer prices aren’t rising, competition must therefore also be fine.

In “Amazon’s Antitrust Paradox,” Khan argued that using consumer pricing as the key benchmark for determining whether a company or a merger is anticompetitive is not sufficient and that Amazon’s size and scale make it anticompetitive. “Specifically,” she wrote in the abstract, “current doctrine underappreciates the risk of predatory pricing and how integration across distinct business lines may prove anticompetitive.”

Her work made an enormous splash. FTC Commissioner Rohit Chopra, a Democrat, sought her as an advisor in 2018, when the commission was kicking off an antitrust enforcement review. “It’s rare to come across a legal prodigy like Lina Khan,” Chopra told The New York Times in 2018. “Nothing about her career is typical. You don’t see many law students publish groundbreaking legal research, or research that had such a deep impact so quickly.”

Critics, on the other hand, dubbed her theories “hipster antitrust.”

During 2019 and 2020, Khan served as one of the House subcommittee staffers who compiled a massive, blockbuster report digging into the antitrust implications of Big Tech. After 16 months of hearings, research, and analysis, the committee determined last fall that Amazon, Apple, Facebook, and Google were all in some way breaking competition law and needed to be reined in.

The news that the White House plans to nominate Khan comes only a few days after the administration announced it was bringing on Tim Wu as a special advisor on technology and competition policy. Wu, too, has a strong background in antitrust analysis. His most recent book, 2018’s The Curse of Bigness, argued that unchecked market concentration was leading to a new Gilded Age and all the attendant problems that come with it.

The FTC has already filed a suit to break up Facebook, and it has reportedly been investigating Amazon for the better part of two years. Appointing Khan would be a likely indication the agency would be more, rather than less, likely to take action in the coming months.

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Harris Co. Judge Lina Hidalgo announces new ‘Stay Smart, Do Your Part’ vaccine campaign

HOUSTON, Texas (KTRK) — Harris County Judge Lina Hidalgo launched a new COVID-19 vaccine campaign Thursday.

The grassroots and paid advertising campaign is aimed to engage residents who may be hesitant to receive the COVID-19 vaccine.

According to Hidalgo’s office, the campaign is titled “Stay Smart, Do Your Part,” and it highlights the safety and efficacy of vaccines.

RELATED: New numbers show Black, Hispanic communities under-vaccinated

Newly released vaccine data from Harris County shows that Black and Hispanic communities are under-vaccinated.

The data that is available shows 48.3% of vaccinated residents in Houston and Harris County are white, 13.4% are Asian, 12.45 are Black, 11.3% are Hispanic or Latino and 14% is listed as “other,” according to city data. When comparing those percentages with the population of each race countywide, more white and Asian residents are being vaccinated compared to Hispanic and Black residents.

The city of Houston’s Health Department says Hispanics have accounted for 55% of COVID-19 deaths, compared to 21% of Blacks and 18% of whites, and 5.5% of Asians.

Across the country, the CDC data shows that, compared to whites, Hispanics are 1.7 times more likely to get COVID-19, four times more likely to end up in the hospital, and almost three times as likely to die.

A study from the University of Houston found that one-third of Texans are likely to refuse a COVID-19 vaccine, and that reluctance is found to be especially true among communities of color.

The study comes as CDC data recently revealed that, of those vaccinated in the first month, only 11% were Hispanic, five percent were Black and six percent were Asian.

SEE ALSO: How access paired with distrust is impacting Hispanic communities getting COVID-19 vaccine

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